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Rumblings on Coffee Day Group's Amazon safari

Last updated on: May 28, 2012 14:45 IST

Rumblings on Coffee Day Group's Amazon safari

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Raghuvir Badrinath in Bengaluru

It was an ambitious foray by V G Siddhartha, reticent owner of the Coffee Day group, as he embarked on an Amazon safari to build a global-scale furniture business.

Now, nearly two years later, there's growing rumbling over the way he's been handling this, over logging in the pristine Amazon rainforest in Guyana.

Siddhartha, through one of his group companies, had acquired a 30-year lease for close to a million acres of forest land for timber in the forests of Guyana.

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The intention was to take timber from this forest and ship it all the way to the small coffee-growing town of Chikmagalur in Karnataka's Western Ghats, the place where Siddhartha grew up and has close to 11,000 acres of coffee estates.

The plan was to process this timber into ready-to-fix furniture -- akin to the Ikea model, which lays stress on providing the right pieces for furniture which can be easily assembled at the recipients' end.

Charges, denial

However, nearly 18 months after, noted experts and some established non-government organisations in Guyana have expressed serious doubt on how this activity is being done.

A key aspect these experts are stating is that there has been no value addition in Guyana to the timber before being shipped out, which is required.

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Janette Bulkan, a noted social anthropologist who was coordinator of the Amerindian Research Unit, University of Guyana, from 1985 to 1999, and senior social scientist at the Iwokrama International Centre from 2000 to 2003, has written a series of articles on the various alleged transgression by Siddhartha's companies.

Alliance for Change, a multi-ethnic political party in Guyana, has also raised doubts over how the lease had been given to Siddhartha and how the process had not been transparent.

Siddhartha, in a detailed conversation with Business Standard, said no law of the land had been breached.

"On projects such as the one we are into, there is always bound to be some opposition from various stake holders.

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"We got the lease for this land from a US company which was going bankrupt.

"We have been working on this project for around 18 months and we have around 100 employees.

"We will set up a processing centre in a period of time there, but the main centre will be in Chikmagalur," he said.

He said they'd also exported a small portion of timber to China.

On the plan for putting up a processing factory in Chikmagalur for the timber, he said, "Yes, there is some delay and land is an issue, which we are solving." Siddhartha further explained that projects such as this one in the Amazon forests are tightly monitored under global regulations.

"One such rule is a specific limitation on how many trees we can cut per acre and we just cannot violate those norms," he added.

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Background

Siddhartha has floated a company, Dark Forest Furniture Company, to retail the furniture in India and has also tied up with Future Group for this.

It is estimated that he has earmarked around Rs 300 crore (Rs 3 billion) to get the furniture project going.

Siddhartha, who began as a coffee exporter, eventually established himself as the leading player in the coffee retailing business.

He has since diversified aggressively into wealth management, Special Economic Zone development, logistics and hospitality, besides the emerging interest in furniture.

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The valuation of the Coffee Day Group is understood to be in the range of close to $1 billion.

As part of these plans and to fuel these diversifications, Siddhartha raised a record $200 million during early 2010 from blue-chip global private equity investors -- KKR, Standard Chartered Private Equity and New Silk Route Partners.

This fund raise was on top of the around $100 mn raised from Sequoia Capital, IFC, Darby Private Equity from the stables of Franklin Templeton and the Deutsche Group, to expand the coffee retailing business during 2007-09.


Photographs: Courtesy, Wikimedia Commons

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